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Quitclaim not bar to filing of dismissal case

[G.R. No. 191475. December 11, 2013.]

PHILIPPINE CARPET MANUFACTURING CORPORATION, PACIFIC CARPET MANUFACTURING

CORPORATION, MR. PATRICIO LIM and MR. DAVID LIM,petitioners, vs. IGNACIO B. TAGYAMON,

PABLITO L. LUNA, FE B. BADAYOS, GRACE B. MARCOS, ROGELIO C. NEMIS, ROBERTO B. ILAO,

ANICIA D. DELA CRUZ and CYNTHIA L. COMANDAO, respondents.

DECISION

PERALTA, J p:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Court of

Appeals (CA) Decision dated July 7, 2009 and Resolution dated February 26, 2010 in CA-G.R. SP No. 105236.

The assailed decision granted the petition for certiorari filed by respondents Ignacio B. Tagyamon (Tagyamon),

Pablito I. Luna (Luna), Fe B. Badayos (Badayos), Grace B. Marcos (Marcos), Rogelio C. Nemis (Nemis), Roberto

B. Ilao (Ilao), Anicia D. Dela Cruz (Dela Cruz), and Cynthia L. Comandao (Comandao), the dispositive portion of

which reads:

WHEREFORE, the petition is GRANTED. The private respondent is hereby ordered to reinstate the petitioners

with full backwages less the amounts they received as separation pays. In case reinstatement would no longer

be feasible because the positions previously held no longer exist, the private respondent shall pay them

backwages plus, in lieu of reinstatement, separation pays equal to one (1) month pay, or one-half (1/2) month

pay for every year of service, whichever is higher. In addition, the private respondent is hereby ordered to pay

the petitioners moral damages in the amount of P20,000.00 each.

SO ORDERED.

The Facts

Petitioner Philippine Carpet Manufacturing Corporation (PCMC) is a corporation registered in the Philippines

engaged in the business of manufacturing wool and yarn carpets and rugs. Respondents were its regular and

permanent employees, but were affected by petitioner's retrenchment and voluntary retirement

programs. cEASTa

On March 15, 2004, Tagyamon, Luna, Badayos, Dela Cruz, and Comandao received a uniformly worded

Memorandum of dismissal, to wit:

This is to inform you that in view of a slump in the market demand for our products due to the un-

competitiveness of our price, the company is constrained to reduce the number of its workforce. The long-term

effects of September 11 and the war in the Middle East have greatly affected the viability of our business and we

are left with no recourse but to reorganize and downsize our organizational structure.

We wish to inform you that we are implementing a retrenchment program in accordance with Article 283 of the

Labor Code of the Philippines, as amended, and its implementing rules and regulations.

In this connection, we regret to advise you that you are one of those affected by the said exercise, and your

employment shall be terminated effective at the close of working hours on April 15, 2004.

Accordingly, you shall be paid your separation pay as mandated by law. You will no longer be required to report

for work during the 30-day notice period in order to give you more time to look for alternative employment.

However, you will be paid the salary corresponding to the said period. We shall process your clearance and other

documents and you may claim the payables due you on March 31, 2004.

Thank you for your services and good luck to your future endeavors.

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As to Marcos, Ilao, and Nemis, they claimed that they were dismissed effective March 31, 2004, together with

fifteen (15) other employees on the ground of lack of market/slump in demand. PCMC, however, claimed that

they availed of the company's voluntary retirement program and, in fact, voluntarily executed their respective

Deeds of Release, Waiver, and Quitclaim.

Claiming that they were aggrieved by PCMC's decision to terminate their employment, respondents filed separate

complaints for illegal dismissal against PCMC, Pacific Carpet Manufacturing Corporation, Mr. Patricio Lim and Mr.

David Lim. These cases were later consolidated. Respondents primarily relied on the Supreme Court's decision

in Philippine Carpet Employees Association (PHILCEA) v. Hon. Sto. Tomas (Philcea case), as to the validity of the

company's retrenchment program. They further explained that PCMC did not, in fact, suffer losses shown by its

acts prior to and subsequent to their termination. They also insisted that their acceptance of separation pay and

signing of quitclaim is not a bar to the pursuit of illegal dismissal case.

PCMC, for its part, defended its decision to terminate the services of respondents being a necessary

management prerogative. It pointed out that as an employer, it had no obligation to keep in its employ more

workers than are necessary for the operation of his business. Thus, there was an authorized cause for dismissal.

Petitioners also stressed that respondents belatedly filed their complaint as they allowed almost three years to

pass making the principle of laches applicable. Considering that respondents accepted their separation pay and

voluntarily executed deeds of release, waiver and quitclaim, PCMC invoked the principle of estoppel on the part

of respondents to question their separation from the service. Finally, as to Marcos, Ilao and Nemis, PCMC

emphasized that they were not dismissed from employment, but in fact they voluntarily retired from employment

to take advantage of the company's program.

On August 23, 2007, Labor Arbiter (LA) Donato G. Quinto, Jr. rendered a Decision dismissing the complaint for

lack of merit. The LA found no flaw in respondents' termination as they voluntarily opted to retire and were

subsequently re-employed on a contractual basis then regularized, terminated from employment and were paid

separation benefits. In view of respondents' belated filing of the complaint, the LA concluded that such action is

a mere afterthought designed primarily for respondents to collect more money, taking advantage of the 2006

Supreme Court decision.

On appeal, the National Labor Relations Commission (NLRC) sustained the LA decision. In addition to the LA

ratiocination, the NLRC emphasized the application of the principle of laches for respondents' inaction for an

unreasonable period.

Still undaunted, respondents elevated the matter to the CA in a petition for certiorari. In reversing the earlier

decisions of the LA and the NLRC, the CA refused to apply the principle of laches, because the case was

instituted prior to the expiration of the prescriptive period set by law which is four years. It stressed that said

principle cannot be invoked earlier than the expiration of the prescriptive period. Citing the Court's decision in

the Philcea case, the CA applied the doctrine of stare decisis, in view of the similar factual circumstances of the

cases. As to Ilao, Nemis and Marcos, while acknowledging their voluntary resignation, the CA found the same

not a bar to the illegal dismissal case because they did so on the mistaken belief that PCMC was losing

money. With the foregoing findings, the CA ordered that respondents be reinstated with full backwages less the

amounts they received as separation pay. In case of impossibility of reinstatement, the CA ordered PCMC to pay

respondents backwages and in lieu of reinstatement, separation pay equal to one month pay or 1/2 month pay

for every year of service whichever is higher, plus moral damages.

The Issues

Aggrieved, petitioners come before the Court in this petition for review on certiorari based on this ground, to wit:

IN RENDERING ITS DISPUTED DECISION AND RESOLUTION, THE COURT A QUO HAS DECIDED A QUESTION

OF SUBSTANCE NOT IN ACCORD WITH LAW AND/OR ESTABLISHED JURISPRUDENCE.

a)Res Judicata should not be followed if to follow it is to perpetuate error (Philippine Trust Co., and Smith Bell &

Co. vs. Mitchell, 59 Phil. 30, 36 (1933). The (Supreme) Court is not precluded from rectifying errors of judgment

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if blind and stubborn adherence to the doctrine of immutability of final judgments would involve the sacrifice of

justice for technicality (Heirs of Maura So vs. Obliosca, G.R. No. 147082, January 28, 2008, 542 SCRA

406) DaIACS

b)Not all waivers and quitclaims are invalid as against public policy. Waivers that represent a voluntary and

reasonable settlement of the laborer's claims are legitimate and should be respected by the Court as the law

between the parties (Gamo-gamo vs. PNOC Shipping and Transport Corp., G.R. No. 141707, May 2,

2002; Alcasero vs. NLRC, 288 SCRA 129) Where the persons making the waiver has done so voluntarily, with a

full understanding thereof, and the consideration for the quitclaim is credible and reasonable, the transaction

must be recognized as valid and binding undertaking (Periquet vs. NLRC, 186 SCRA 724 [1990];Magsalin vs.

Coca Cola Bottlers Phils., Inc. vs. National Organization of Working Men (N.O.W.M.], G.R. No. 148492, May 2,

2003).

Petitioners contend that the Philcea case decided by this Court and relied upon by the CA in the assailed decision

was based on erroneous factual findings, inapplicable financial statement, as well as erroneous analysis of such

financial statements. They, thus, implore the Court to revisit the cited case in order to dispense with substantial

justice. They explain that the Court made conclusions based on erroneous information. Petitioners also insist

that the doctrines of res judicata and law of the case are not applicable, considering that this case does not

involve the same parties as the Philcea case. They likewise point out that not all respondents were involuntarily

separated on the ground of redundancy as some of them voluntarily availed of the company's Voluntary

Separation Program. They further contend that respondents are guilty not only of laches but also of estoppel in

view of their inaction for an unreasonable length of time to assail the alleged illegal dismissal and in voluntarily

executing a release, quitclaim and waiver.

The Court's Ruling

Laches

Laches has been defined as the failure or neglect for an unreasonable and unexplained length of time to do that

which by exercising due diligence, could or should have been done earlier, thus, giving rise to a presumption

that the party entitled to assert it either has abandoned or declined to assert it. It has been repeatedly held by

the Court that:

. . . Laches is a doctrine in equity while prescription is based on law. Our courts are basically courts of law not

courts of equity. Thus, laches cannot be invoked to resist the enforcement of an existing legal right. . . . Courts

exercising equity jurisdiction are bound by rules of law and have no arbitrary discretion to disregard them.

InZabat Jr. v. Court of Appeals . . ., this Court was more emphatic in upholding the rules of procedure. We said

therein: ADTCaI

As for equity which has been aptly described as a "justice outside legality," this is applied only in the absence of,

and never against, statutory law or, as in this case, judicial rules of procedure. Aequetas nunguam contravenit

legis. The pertinent positive rules being present here, they should preempt and prevail over all abstract

arguments based only on equity.

Thus, where the claim was filed within the [four-year] statutory period, recovery therefore cannot be barred by

laches. Courts should never apply the doctrine of laches earlier than the expiration of time limited for the

commencement of actions at law."

An action for reinstatement by reason of illegal dismissal is one based on an injury to the complainants' rights

which should be brought within four years from the time of their dismissal pursuant to Article 1146 of the Civil

Code. Respondents' complaint filed almost 3 years after their alleged illegal dismissal was still well within the

prescriptive period. Laches cannot, therefore, be invoked yet. To be sure, laches may be applied only upon the

most convincing evidence of deliberate inaction, for the rights of laborers are protected under the social justice

provisions of the Constitution and under the Civil Code.

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Stare Decisis

The main issue sought to be determined in this case is the validity of respondents' dismissal from employment.

Petitioners contend that they either voluntarily retired from the service or terminated from employment based on

an authorized cause. The LA and the NLRC are one in saying that the dismissal was legal. The CA, however, no

longer discussed the validity of the ground of termination. Rather, it applied the Court's decision in the Philcea

case where the same ground was thoroughly discussed. In other words, the appellate court applied the doctrine

of stare decisis and reached the same conclusion as the earlier case.

Under the doctrine of stare decisis, when a court has laid down a principle of law as applicable to a certain state

of facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the

same, even though the parties may be different. Where the facts are essentially different, however, stare

decisisdoes not apply, for a perfectly sound principle as applied to one set of facts might be entirely

inappropriate when a factual variant is introduced.

The question, therefore, is whether the factual circumstances of this present case are substantially the same as

the Philcea case.

We answer in the affirmative.

This case and the Philcea case involve the same period which is March to April 2004; the issuance of

Memorandum to employees informing them of the implementation of the cost reduction program; the

implementation of the voluntary retirement program and retrenchment program, except that this case involves

different employees; the execution of deeds of release, waiver, and quitclaim, and the acceptance of separation

pay by the affected employees.

The illegality of the basis of the implementation of both voluntary retirement and retrenchment programs of

petitioners had been thoroughly ruled upon by the Court in the Philcea case. It discussed the requisites of both

retrenchment and redundancy as authorized causes of termination and that petitioners failed to substantiate

them. In ascertaining the bases of the termination of employees, it took into consideration petitioners' claim of

business losses; the purchase of machinery and equipment after the termination, the declaration of cash

dividends to stockholders, the hiring of 100 new employees after the retrenchment, and the authorization of full

blast overtime work for six hours daily. These, said the Court, are inconsistent with petitioners' claim that there

was a slump in the demand for its products which compelled them to implement the termination programs. In

arriving at its conclusions, the Court took note of petitioners' net sales, gross and net profits, as well as net

income. The Court, thus, reached the conclusion that the retrenchment effected by PCMC is invalid due to a

substantive defect. We quote hereunder the Court's pronouncement in the Philcea case, to wit:

Respondents failed to adduce clear and convincing evidence to prove the confluence of the essential requisites

for a valid retrenchment of its employees. We believe that respondents acted in bad faith in terminating the

employment of the members of petitioner Union.

Contrary to the claim of respondents that the Corporation was experiencing business losses, respondent

Corporation, in fact, amassed substantial earnings from 1999 to 2003. It found no need to appropriate its

retained earnings except on March 23, 2001, when it appropriated P60,000,000.00 to increase production

capacity. . . .

xxx xxx xxx

The evidence on record belies the P22,820,151.00 net income loss in 2004 as projected by the SOLE. On March

29, 2004, the Board of Directors approved the appropriation of P20,000,000.00 to purchase machinery to

improve its facilities, and declared cash dividends to stockholders at P30.00 per share. . . .

xxx xxx xxx

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It bears stressing that the appropriation of P20,000,000.00 by the respondent Corporation on September 16,

2004 was made barely five months after the 77 Union members were dismissed on the ground that respondent

Corporation was suffering from "chronic depression." Cash dividends were likewise declared on March 29, 2004,

barely two weeks after it implemented its "retrenchment program."

If respondent Corporation were to be believed that it had to retrench employees due to the debilitating slump in

demand for its products resulting in severe losses, how could it justify the purchase of P20,000,000.00 worth of

machinery and equipment? There is likewise no justification for the hiring of more than 100 new employees,

more than the number of those who were retrenched, as well as the order authorizing full blast overtime work

for six hours daily. All these are inconsistent with the intransigent claim that respondent Corporation was

impelled to retrench its employees precisely because of low demand for its products and other external causes.

xxx xxx xxx

That respondents acted in bad faith in retrenching the 77 members of petitioner is buttressed by the fact that

Diaz issued his Memorandum announcing the cost-reduction program on March 9, 2004, after receipt of the

February 10, 2004 letter of the Union president which included the proposal for additional benefits and wage

increases to be incorporated in the CBA for the ensuing year. Petitioner and its members had no inkling, before

February 10, 2004, that respondent Corporation would terminate their employment. Moreover, respondent

Corporation failed to exhaust all other means to avoid further losses without retrenching its employees, such as

utilizing the latter's respective forced vacation leaves. Respondents also failed to use fair and reasonable criteria

in implementing the retrenchment program, and instead chose to retrench 77 of the members of petitioner out

of the dismissed 88 employees. Worse, respondent Corporation hired new employees and even rehired the

others who had been "retrenched."

As shown by the SGV & Co. Audit Report, as of year end December 31, 2003, respondent Corporation increased

its net sales by more than P8,000,000.00. Respondents failed to prove that there was a drastic or severe

decrease in the product sales or that it suffered severe business losses within an interval of three (3) months

from January 2004 to March 9, 2004 when Diaz issued said Memorandum. Such claim of a depressed market as

of March 9, 2004 was only a pretext to retaliate against petitioner Union and thereby frustrate its demands for

more monetary benefits and, at the same time, justify the dismissal of the 77 Union members.

xxx xxx xxx

In contrast, in this case, the retrenchment effected by respondent Corporation is invalid due to a substantive

defect, non-compliance with the substantial requirements to effect a valid retrenchment; it necessarily follows

that the termination of the employment of petitioner Union's members on such ground is, likewise, illegal. As

such, they (petitioner Union's members) are entitled to reinstatement with full backwages.

We find no reason to depart from the above conclusions which are based on the Court's examination of the

evidence presented by the parties therein. As the respondents here were similarly situated as the union

members in the Philcea case, and considering that the questioned dismissal from the service was based on the

same grounds under the same circumstances, there is no need to relitigate the issues presented herein. In short,

we adopt the Court's earlier findings that there was no valid ground to terminate the employees.

A closer look at petitioners' arguments would show that they want the Court to re-examine our decision in

the Philcea case allegedly on the ground that the conclusions therein were based on erroneous interpretation of

the evidence presented.

Indeed, in Abaria v. National Labor Relations Commission, although the Court was confronted with the same

issue of the legality of a strike that has already been determined in a previous case, the Court refused to apply

the doctrine of stare decisis insofar as the award of backwages was concerned because of the clear erroneous

application of the law. We held therein that the Court abandons or overrules precedents whenever it realizes

that it erred in the prior decision. The Court's pronouncement in that case is instructive:

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The doctrine though is not cast in stone for upon a showing that circumstances attendant in a particular case

override the great benefits derived by our judicial system from the doctrine of stare decisis, the Court is justified

in setting it aside. For the Court, as the highest court of the land, may be guided but is not controlled by

precedent. Thus, the Court, especially with a new membership, is not obliged to follow blindly a particular

decision that it determines, after re-examination, to call for a rectification.

The Abaria case, however, is not applicable in this case. There is no reason to abandon the Court's ruling in

the Philcea case.

Do we apply the aforesaid decision to all the respondents herein? Again, we answer in the affirmative.

Just like the union members in the Philcea case, respondents Tagyamon, Luna, Badayos, Dela Cruz, and

Comandao received similarly worded memorandum of dismissal effective April 15, 2004 based on the same

ground of slump in the market demand for the company's products. As such, they are similarly situated in all

aspects as the union members. With respect to respondents Marcos, Nemis and Ilao, although they applied for

voluntary retirement, the same was not accepted by petitioner. Instead, it issued notice of termination dated

March 6, 2004 to these same employees. And while it is true that petitioner paid them separation pay, the

payment was in the nature of separation and not retirement pay. In other words, payment was made because of

the implementation of the retrenchment program and not because of retirement. As their application for availing

of the company's voluntary retirement program was based on the wrong premise, the intent to retire was not

clearly established, or rather that the retirement is involuntary. Thus, they shall be considered discharged from

employment. Consequently, they shall be treated as if they are in the same footing as the other respondents

herein and the union members in the Philcea case.

Waivers, Releases and Quitclaims

"As a rule, deeds of release and quitclaim cannot bar employees from demanding benefits to which they are

legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits would not

amount to estoppel." To excuse respondents from complying with the terms of their waivers, they must locate

their case within any of three narrow grounds: (1) the employer used fraud or deceit in obtaining the waivers;

(2) the consideration the employer paid is incredible and unreasonable; or (3) the terms of the waiver are

contrary to law, public order, public policy, morals, or good customs or prejudicial to a third person with a right

recognized by law. The instant case falls under the first situation.

As the ground for termination of employment was illegal, the quitclaims are deemed illegal as the employees'

consent had been vitiated by mistake or fraud. The law looks with disfavor upon quitclaims and releases by

employees pressured into signing by unscrupulous employers minded to evade legal responsibilities. The

circumstances show that petitioner's misrepresentation led its employees, specifically respondents herein, to

believe that the company was suffering losses which necessitated the implementation of the voluntary

retirement and retrenchment programs, and eventually the execution of the deeds of release, waiver and

quitclaim.

It can safely be concluded that economic necessity constrained respondents to accept petitioners' monetary offer

and sign the deeds of release, waiver and quitclaim. That respondents are supervisors and not rank-and-file

employees does not make them less susceptible to financial offers, faced as they were with the prospect of

unemployment. The Court has allowed supervisory employees to seek payment of benefits and a manager to

sue for illegal dismissal even though, for a consideration, they executed deeds of quitclaims releasing their

employers from liability.

. . . There is no nexus between intelligence, or even the position which the employee held in the company when

it concerns the pressure which the employer may exert upon the free will of the employee who is asked to sign a

release and quitclaim. A lowly employee or a sales manager, as in the present case, who is confronted with the

same dilemma of whether [to sign] a release and quitclaim and accept what the company offers them, or [to

refuse] to sign and walk out without receiving anything, may do succumb to the same pressure, being very well

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aware that it is going to take quite a while before he can recover whatever he is entitled to, because it is only

after a protracted legal battle starting from the labor arbiter level, all the way to this Court, can he receive

anything at all. The Court understands that such a risk of not receiving anything whatsoever, coupled with the

probability of not immediately getting any gainful employment or means of livelihood in the meantime,

constitutes enough pressure upon anyone who is asked to sign a release and quitclaim in exchange of some

amount of money which may be way below what he may be entitled to based on company practice and policy or

by law.

The amounts already received by respondents as consideration for signing the releases and quitclaims should be

deducted from their respective monetary awards.

WHEREFORE, premises considered, the petition is hereby DENIED. The Court of Appeals Decision dated July

7, 2009 and Resolution dated February 26, 2010 in CA-G.R. SP No. 105236 are AFFIRMED.

SO ORDERED.

||| (Philippine Carpet Manufacturing Corp. v. Tagyamon, G.R. No. 191475, [December 11, 2013])

Burden of proof of employer-employee relationship

[G.R. No. 192558. February 15, 2012.]

BITOY JAVIER (DANILO P. JAVIER), petitioner, vs. FLY ACE CORPORATION/FLORDELYN

CASTILLO, respondents.

DECISION

MENDOZA, J p:

This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision of the

Court of Appeals (CA) and its June 7, 2010 Resolution, in CA-G.R. SP No. 109975, which reversed the May 28,

2009 Decision of the National Labor Relations Commission (NLRC) in the case entitled Bitoy Javier v. Fly

Ace/Flordelyn Castillo, holding that petitioner Bitoy Javier (Javier) was illegally dismissed from employment and

ordering Fly Ace Corporation (Fly Ace) to pay backwages and separation pay in lieu of reinstatement.

Antecedent Facts

On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor

standard benefits. He alleged that he was an employee of Fly Ace since September 2007, performing various

tasks at the respondent's warehouse such as cleaning and arranging the canned items before their delivery to

certain locations, except in instances when he would be ordered to accompany the company's delivery vehicles,

as pahinante; that he reported for work from Monday to Saturday from 7:00 o'clock in the morning to 5:00

o'clock in the afternoon; that during his employment, he was not issued an identification card and payslips by

the company; that on May 6, 2008, he reported for work but he was no longer allowed to enter the company

premises by the security guard upon the instruction of Ruben Ong (Mr. Ong), his superior; that after several

minutes of begging to the guard to allow him to enter, he saw Ong whom he approached and asked why he was

being barred from entering the premises; that Ong replied by saying, "Tanungin mo anak mo;" that he then

went home and discussed the matter with his family; that he discovered that Ong had been courting his

daughter Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn tried to talk to Ong and

convince him to spare her father from trouble but he refused to accede; that thereafter, Javier was terminated

from his employment without notice; and that he was neither given the opportunity to refute the cause/s of his

dismissal from work.

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To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier was a

stevedore or pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was subscribed

before the Labor Arbiter (LA).

For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries. Sometime

in December 2007, Javier was contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at an

agreed rate of P300.00 per trip, which was later increased to P325.00 in January 2008. Mr. Ong contracted

Javier roughly 5 to 6 times only in a month whenever the vehicle of its contracted hauler, Milmar Hauling

Services, was not available. On April 30, 2008, Fly Ace no longer needed the services of Javier. Denying that he

was their employee, Fly Ace insisted that there was no illegal dismissal. Fly Ace submitted a copy of its

agreement with Milmar Hauling Services and copies of acknowledgment receipts evidencing payment to Javier

for his contracted services bearing the words, "daily manpower(pakyaw/piece rate pay)" and the latter's

signatures/initials.

Ruling of the Labor Arbiter

On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to

present proof that he was a regular employee of Fly Ace. He wrote:

Complainant has no employee ID showing his employment with the Respondent nor any document showing that

he received the benefits accorded to regular employees of the Respondents. His contention that Respondent

failed to give him said ID and payslips implies that indeed he was not a regular employee of Fly Ace considering

that complainant was a helper and that Respondent company has contracted a regular trucking for the delivery

of its products.

Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries. Since there

is a regular hauler to deliver its products, we give credence to Respondents' claim that complainant was

contracted on "pakiao" basis.

As to the claim for underpayment of salaries, the payroll presented by the Respondents showing salaries of

workers on "pakiao" basis has evidentiary weight because although the signature of the complainant appearing

thereon are not uniform, they appeared to be his true signature.

xxx xxx xxx

Hence, as complainant received the rightful salary as shown by the above described payrolls, Respondents are

not liable for salary differentials.

Ruling of the NLRC

On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and

immediately concluded that he was not a regular employee simply because he failed to present proof. It was of

the view that a pakyaw-basis arrangement did not preclude the existence of employer-employee relationship.

"Payment by result . . . is a method of compensation and does not define the essence of the relation. It is a

mere method of computing compensation, not a basis for determining the existence or absence of an employer-

employee relationship." The NLRC further averred that it did not follow that a worker was a job contractor and

not an employee, just because the work he was doing was not directly related to the employer's trade or

business or the work may be considered as "extra" helper as in this case; and that the relationship of an

employer and an employee was determined by law and the same would prevail whatever the parties may call it.

In this case, the NLRC held that substantial evidence was sufficient basis for judgment on the existence of the

employer-employee relationship. Javier was a regular employee of Fly Ace because there was reasonable

connection between the particular activity performed by the employee (as a 'pahinante') in relation to the usual

business or trade of the employer (importation, sales and delivery of groceries). He may not be considered as an

independent contractor because he could not exercise any judgment in the delivery of company products. He

was only engaged as a "helper."

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Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For failing

to present proof of a valid cause for his termination, Fly Ace was found to be liable for illegal dismissal of Javier

who was likewise entitled to backwages and separation pay in lieu of reinstatement. The NLRC thus ordered:

WHEREFORE, premises considered, complainant's appeal is partially GRANTED. The assailed Decision of the

labor arbiter is VACATED and a new one is hereby entered holding respondent FLY ACE CORPORATION guilty of

illegal dismissal and non-payment of 13th month pay. Consequently, it is hereby ordered to pay complainant

DANILO "Bitoy" JAVIER the following:

1. Backwages - P45,770.83

2. Separation pay, in lieu of reinstatement - 8,450.00

3. Unpaid 13th month pay (proportionate) - 5,633.33

TOTAL - P59,854.16

=========

All other claims are dismissed for lack of merit.

SO ORDERED.

Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and

reinstated the dismissal of Javier's complaint as ordered by the LA. The CA exercised its authority to make its

own factual determination anent the issue of the existence of an employer-employee relationship between the

parties. According to the CA:

xxx xxx xxx

In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a valid

cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be

established. . . . it is incumbent upon private respondent to prove the employee-employer relationship by

substantial evidence.

xxx xxx xxx

It is incumbent upon private respondent to prove, by substantial evidence, that he is an employee of petitioners,

but he failed to discharge his burden. The non-issuance of a company-issued identification card to private

respondent supports petitioners' contention that private respondent was not its employee.

The CA likewise added that Javier's failure to present salary vouchers, payslips, or other pieces of evidence to

bolster his contention, pointed to the inescapable conclusion that he was not an employee of Fly Ace. Further, it

found that Javier's work was not necessary and desirable to the business or trade of the company, as it was only

when there were scheduled deliveries, which a regular hauling service could not deliver, that Fly Ace would

contract the services of Javier as an extra helper. Lastly, the CA declared that the facts alleged by Javier did not

pass the "control test." He contracted work outside the company premises; he was not required to observe

definite hours of work; he was not required to report daily; and he was free to accept other work elsewhere as

there was no exclusivity of his contracted service to the company, the same being co-terminous with the trip

only. Since no substantial evidence was presented to establish an employer-employee relationship, the case for

illegal dismissal could not prosper.

The petitioners moved for reconsideration, but to no avail.

10

Hence, this appeal anchored on the following grounds:

I.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER WAS

NOT A REGULAR EMPLOYEE OF FLY ACE.

II.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS

NOT ENTITLED TO HIS MONETARY CLAIMS.

The petitioner contends that other than its bare allegations and self-serving affidavits of the other employees,

Fly Ace has nothing to substantiate its claim that Javier was engaged on a pakyaw basis. Assuming that Javier

was indeed hired on a pakyaw basis, it does not preclude his regular employment with the company. Even the

acknowledgment receipts bearing his signature and the confirming receipt of his salaries will not show the true

nature of his employment as they do not reflect the necessary details of the commissioned task. Besides, Javier's

tasks as pahinante are related, necessary and desirable to the line of business by Fly Ace which is engaged in

the importation and sale of grocery items. "On days when there were no scheduled deliveries, he worked in

petitioners' warehouse, arranging and cleaning the stored cans for delivery to clients." More importantly, Javier

was subject to the control and supervision of the company, as he was made to report to the office from Monday

to Saturday, from 7:00 o'clock in the morning until 5:00 o'clock in the afternoon. The list of deliverable goods,

together with the corresponding clients and their respective purchases and addresses, would necessarily have

been prepared by Fly Ace. Clearly, he was subjected to compliance with company rules and regulations as

regards working hours, delivery schedule and output, and his other duties in the warehouse.

The petitioner chiefly relied on Chavez v. NLRC, where the Court ruled that payment to a worker on a per trip

basis is not significant because "this is merely a method of computing compensation and not a basis for

determining the existence of employer-employee relationship." Javier likewise invokes the rule that, "in

controversies between a laborer and his master, . . . doubts reasonably arising from the evidence should be

resolved in the former's favour. The policy is reflected is no less than the Constitution, Labor Code and Civil

Code."

Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latter's failure to

observe substantive and procedural due process. Since his dismissal was not based on any of the causes

recognized by law, and was implemented without notice, Javier is entitled to separation pay and backwages.

In its Comment, Fly Ace insists that there was no substantial evidence to prove employer-employee relationship.

Having a service contract with Milmar Hauling Services for the purpose of transporting and delivering company

products to customers, Fly Ace contracted Javier as an extra helper or pahinante on a mere "per trip basis."

Javier, who was actually a loiterer in the area, only accompanied and assisted the company driver when Milmar

could not deliver or when the exigency of extra deliveries arises for roughly five to six times a month. Before

making a delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with its loaded company

products. With the vehicle and products in their custody, the driver and Javier "would leave the company

premises using their own means, method, best judgment and discretion on how to deliver, time to deliver, where

and [when] to start, and manner of delivering the products."

Fly Ace dismisses Javier's claims of employment as baseless assertions. Aside from his bare allegations, he

presented nothing to substantiate his status as an employee. "It is a basic rule of evidence that each party must

prove his affirmative allegation. If he claims a right granted by law, he must prove his claim by competent

evidence, relying on the strength of his own evidence and not upon the weakness of his opponent." Invoking

the case of Lopez v. Bodega City, Fly Ace insists that in an illegal dismissal case, the burden of proof is upon the

complainant who claims to be an employee. It is essential that an employer-employee relationship be proved by

substantial evidence. Thus, it cites:

11

In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee

was for a valid cause. However, before a case for illegal dismissal can prosper, an employer-employee

relationship must first be established.

Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, "which are

unfortunately not supported by proof, documentary or otherwise." Javier simply assumed that he was an

employee of Fly Ace, absent any competent or relevant evidence to support it. "He performed his contracted

work outside the premises of the respondent; he was not even required to report to work at regular hours; he

was not made to register his time in and time out every time he was contracted to work; he was not subjected

to any disciplinary sanction imposed to other employees for company violations; he was not issued a company

I.D.; he was not accorded the same benefits given to other employees; he was not registered with the Social

Security System (SSS) as petitioner's employee; and, he was free to leave, accept and engage in other means of

livelihood as there is no exclusivity of his contracted services with the petitioner, his services being co-terminus

with the trip only. All these lead to the conclusion that petitioner is not an employee of the respondents."

Moreover, Fly Ace claims that it had "no right to control the result, means, manner and methods by which Javier

would perform his work or by which the same is to be accomplished." In other words, Javier and the company

driver were given a free hand as to how they would perform their contracted services and neither were they

subjected to definite hours or condition of work.

Fly Ace likewise claims that Javier's function as a pahinante was not directly related or necessary to its principal

business of importation and sales of groceries. Even without Javier, the business could operate its usual course

as it did not involve the business of inland transportation. Lastly, the acknowledgment receipts bearing Javier's

signature and words "pakiao rate," referring to his earned salaries on a per trip basis, have evidentiary weight

that the LA correctly considered in arriving at the conclusion that Javier was not an employee of the company.

The Court affirms the assailed CA decision.

It must be noted that the issue of Javier's alleged illegal dismissal is anchored on the existence of an employer-

employee relationship between him and Fly Ace. This is essentially a question of fact. Generally, the Court does

not review errors that raise factual questions. However, when there is conflict among the factual findings of the

antecedent deciding bodies like the LA, the NLRC and the CA, "it is proper, in the exercise of Our equity

jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-examine

the questioned findings." In dealing with factual issues in labor cases, "substantial evidence that amount of

relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is sufficient."

As the records bear out, the LA and the CA found Javier's claim of employment with Fly Ace as wanting and

deficient. The Court is constrained to agree. Although Section 10, Rule VII of the New Rules of Procedure of the

NLRC allows a relaxation of the rules of procedure and evidence in labor cases, this rule of liberality does not

mean a complete dispensation of proof. Labor officials are enjoined to use reasonable means to ascertain the

facts speedily and objectively with little regard to technicalities or formalities but nowhere in the rules are they

provided a license to completely discount evidence, or the lack of it. The quantum of proof required, however,

must still be satisfied. Hence, "when confronted with conflicting versions on factual matters, it is for them in the

exercise of discretion to determine which party deserves credence on the basis of evidence received, subject

only to the requirement that their decision must be supported by substantial evidence." Accordingly, the

petitioner needs to show by substantial evidence that he was indeed an employee of the company against which

he claims illegal dismissal.

Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and cheese. It

is, therefore, incumbent upon the Court to determine whether the party on whom the burden to prove lies was

able to hurdle the same. "No particular form of evidence is required to prove the existence of such employer-

employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. Hence,

while no particular form of evidence is required, a finding that such relationship exists must still rest on some

substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as

12

itsqualitative aspects." Although substantial evidence is not a function of quantity but rather of quality, the . . .

circumstances of the instant case demand that something more should have been proffered. Had there been

other proofs of employment, such as . . . inclusion in petitioner's payroll, or a clear exercise of control, the Court

would have affirmed the finding of employer-employee relationship."

In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim

by the requisite quantum of evidence. "Whoever claims entitlement to the benefits provided by law should

establish his or her right thereto . . . ." Sadly, Javier failed to adduce substantial evidence as basis for the grant

of relief.

In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By

way of evidence on this point, all that Javier presented were his self-serving statements purportedly showing his

activities as an employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his

claim. Hence, the Court sees no reason to depart from the findings of the CA.

While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work in the

company premises during weekdays arranging and cleaning grocery items for delivery to clients, no other proof

was submitted to fortify his claim. The lone affidavit executed by one Bengie Valenzuela was unsuccessful in

strengthening Javier's cause. In said document, all Valenzuela attested to was that he would frequently see

Javier at the workplace where the latter was also hired as stevedore. Certainly, in gauging the evidence

presented by Javier, the Court cannot ignore the inescapable conclusion that his mere presence at the workplace

falls short in proving employment therein. The supporting affidavit could have, to an extent, bolstered Javier's

claim of being tasked to clean grocery items when there were no scheduled delivery trips, but no information

was offered in this subject simply because the witness had no personal knowledge of Javier's employment status

in the company. Verily, the Court cannot accept Javier's statements, hook, line and sinker.

The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine

the existence of an employer-employee relationship, viz.: (1) the selection and engagement of the employee; (2)

the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct. Of

these elements, the most important criterion is whether the employer controls or has reserved the right to

control the employee not only as to the result of the work but also as to the means and methods by which the

result is to be accomplished.

In this case, Javier was not able to persuade the Court that the above elements exist in his case. He could not

submit competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as

an employee, or that Fly Ace could dictate what his conduct should be while at work. In other words, Javier's

allegations did not establish that his relationship with Fly Ace had the attributes of an employer-employee

relationship on the basis of the above-mentioned four-fold test. Worse, Javier was not able to refute Fly Ace's

assertion that it had an agreement with a hauling company to undertake the delivery of its goods. It was also

baffling to realize that Javier did not dispute Fly Ace's denial of his services' exclusivity to the company. In short,

all that Javier laid down were bare allegations without corroborative proof.

Fly Ace does not dispute having contracted Javier and paid him on a "per trip" rate as a stevedore, albeit on

a pakyaw basis. The Court cannot fail to note that Fly Ace presented documentary proof that Javier was indeed

paid on a pakyaw basis per the acknowledgment receipts admitted as competent evidence by the LA.

Unfortunately for Javier, his mere denial of the signatures affixed therein cannot automatically sway us to ignore

the documents because "forgery cannot be presumed and must be proved by clear, positive and convincing

evidence and the burden of proof lies on the party alleging forgery."

Considering the above findings, the Court does not see the necessity to resolve the second issue presented.

One final note. The Court's decision does not contradict the settled rule that "payment by the piece is just a

method of compensation and does not define the essence of the relation." Payment on a piece-rate basis does

not negate regular employment. "The term 'wage' is broadly defined in Article 97 of the Labor Code as

13

remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time,

task, piece or commission basis. Payment by the piece is just a method of compensation and does not define the

essence of the relations. Nor does the fact that the petitioner is not covered by the SSS affect the employer-

employee relationship. However, in determining whether the relationship is that of employer and employee or

one of an independent contractor, each case must be determined on its own facts and all the features of the

relationship are to be considered." Unfortunately for Javier, the attendant facts and circumstances of the instant

case do not provide the Court with sufficient reason to uphold his claimed status as employee of Fly Ace.

While the Constitution is committed to the policy of social justice and the protection of the working class, it

should not be supposed that every labor dispute will be automatically decided in favor of labor. Management

also has its rights which are entitled to respect and enforcement in the interest of simple fair play. Out of its

concern for the less privileged in life, the Court has inclined, more often than not, toward the worker and upheld

his cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to the rule that

justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable

law and doctrine.

WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7,

2010 Resolution, in CA-G.R. SP No. 109975, are herebyAFFIRMED.

SO ORDERED.

||| (Javier v. Fly Ace Corp., G.R. No. 192558, [February 15, 2012])

Evidence presented for the first time on appeal

[G.R. No. 186344. February 20, 2013.]

LEOPARD SECURITY AND INVESTIGATION AGENCY, petitioner, vs. TOMAS QUITOY, RAUL SABANG

and DIEGO MORALES, respondents.

DECISION

PEREZ, J p:

Is an award of separation pay proper despite lack of showing of illegal dismissal? This is the main issue in this

Rule 45 Petition for Review on Certiorari assailing the Decision dated 26 September 2008 rendered and the

Resolution dated 21 January 2009 issued by the Twentieth Division of the Court of Appeals (CA) in CA-G.R. SP

No. 03097.

The factual antecedents are not in dispute.

Alongside Numeriano Ondong, respondents Tomas Quitoy, Raul Sabang and Diego Morales were hired as

security guards by petitioner Leopard Security and Investigation Agency (LSIA) which maintained its office at

BCC House, 537 Shaw Boulevard, Mandaluyong City. All being residents of Cebu City, respondents were

assigned by LSIA to the different branches of its only client in said locality, Union Bank of the Philippines (Union

Bank). On 1 April 2005, it appears that Union Bank served a notice to LSIA, terminating the parties' security

service contract effective at the end of business hours of 30 April 2005. Thru its representative,

RogelioMorales, LSIA informed respondents on 29 April 2005 of the termination of its contract with Union Bank

which had decided to change its security provider. Upon Morales' instruction, respondents went to the Union

Bank Cebu Business Park Branch on 30 April 2005, for the turnover of their service firearms to Arnel Cortes,

Union Bank's Chief Security Officer. On 3 May 2005, respondents and Ondong filed a complaint for illegal

dismissal, unpaid 13th month pay and service incentive leave pay (SILP), moral and exemplary damages as well

as attorney's fees against LSIA, its President, Jose Poe III, Union Bank, its Regional Service and Operations

Officer, Catherine Cheung, Herbert Hojas, Protectors Services, Inc. (PSI) and Capt. Gerardo Jaro. With the

14

complaint already docketed as RAB Case No. 07-05-0979-2005 before the Regional Arbitration Branch No. VII of

the National Labor Relations Commission (NLRC) in Cebu City, it appears that LSIA sent on 10 May 2005 a

notice requiring respondents to report for work to its Mandaluyong City office. In an Order dated 6 June 2005,

Cheung and Hojas were later dropped as parties-respondents from the case upon motion of respondents. In

view of Ondong's execution of a quitclaim, on the other hand, his complaint was likewise dismissed with

prejudice, resulting in the exclusion of PSI and Jaro as parties-respondents from the case.

In support of their complaint, respondents averred that they were hired and assigned by LSIA to the different

Cebu City branches of Union Bank which directly paid their salaries and whose branch managers exercised direct

control and supervision over them. Required to work from 7:30 a.m. to 9:00 p.m. daily, respondents claimed

that they took orders and instructions from Union Bank's branch managers since LSIA had no administrative

personnel in Cebu City. Respondents further asserted that, after introducing himself as a representative of LSIA

on 29 April 2005, Morales belatedly informed them that their services would be terminated at the end of the

office hours on the same business day. Directed by Morales to report to Union Bank's Cebu Business Park Branch

the next day, respondents maintained that they surrendered their service firearms to Cortes who told them that

Union Bank would be engaging the services of another security agency effective the next working day. Not even

reimbursed their firearm bond nor told that Union Bank had no monetary obligation to them, respondents

claimed they were constrained to file their complaint and to pray that the former be held jointly and severally

liable with LSIA for their claims.

In its position paper, LSIA, on the other hand, asseverated that upon being hired, respondents opted for an

assignment in Cebu City and were, accordingly, detailed at the different branches of Union Bank in said locality.

Informed by Union Bank on 1 April 2005 of the termination of their security service contract effective 30 April

2005, LSIA claimed that it relieved respondents from their assignments by the end of the business hours of the

latter date. Petitioners would, on 10 May 2005, direct respondents to report for work at its Mandaluyong City

office. As respondents failed to do so, LSIA alleged that it issued show cause letters on 21 June 2005, requiring

the former to explain why they should not be administratively sanctioned for their unexplained absences. As the

avowed direct employer of respondents, LSIA also prayed that Union Bank be dropped from the case and that

the complaint be altogether dismissed for lack of merit. Invoking the security service contract it executed with

LSIA from which its lack of an employer-employee relationship with respondents could be readily gleaned, Union

Bank, in turn, asserted that the complaint should be dismissed as against it for lack of cause of action.

On 6 April 2006, Labor Arbiter Violeta Ortiz-Bantug rendered a Decision, finding LSIA liable for the illegal

dismissal of respondents. Faulting LSIA for informing respondents of the termination of their services only on 30

April 2005 despite Union Bank's 1 April 2005 advice of the termination of its security service contract, the Labor

Arbiter ruled that the 10 May 2005 report to work order did not show a sincere intention on the part of LSIA to

provide respondents with other assignments. Aside from respondents' claims for backwages, LSIA was ordered

by the Labor Arbiter to pay the former's claim for separation pay on the ground that reinstatement was no

longer feasible under the circumstances. Although absolved from liability for the foregoing awards upon the

finding that LSIA was an independent contractor, Union Bank was, however, held jointly and severally liable with

said security agency for the payment of respondents' claims for proportionate 13th month pay and SILP for the

three years immediately preceding the institution of the case.

On appeal, the foregoing decision was modified in the 20 March 2007 Decision rendered by the Fourth Division

of the NLRC in NLRC Case No. V-000570-2006. Applying the principle that security agencies like LSIA are allowed

to put security guards on temporary off-detail or floating status for a period not exceeding six months, the NLRC

discounted the factual and legal bases for the illegal dismissal determined by the Labor Arbiter as well as the

backwages awarded in favor of respondents. Finding that the filing of the complaint on 3 May 2005 was

premature, the NLRC took note of the fact that respondents did not even protest against the report to work

order issued by LSIA. Even then, the NLRC upheld the Labor Arbiter's award of separation pay on the theory that

reinstatement was no longer viable. The awards of proportionate 13th month pay and SILP for which Union Bank

and LSIA were held solidarily liable were likewise sustained for failure of the latter to discharge the burden of

proving payment of said labor standard benefits. Belatedly submitting documents to prove its payment of SILP,

15

LSIA filed a motion for reconsideration of the foregoing decision which was, however, denied for lack of merit in

the NLRC's 23 July 2007 Resolution.

Dissatisfied, LSIA filed the Rule 65 Petition for Certiorari docketed before the CA as CA-G.R. SP No. 03097.

Calling attention to the impropriety of the award of separation pay absent a finding of illegal dismissal, LSIA also

faulted the NLRC for ignoring the evidence it submitted alongside its motion for reconsideration to prove the

payment of respondents' SILP for the years 2003, 2004 and 2005. On 26 September 2008, the then Twentieth

Division of the CA rendered the herein assailed decision, affirming the NLRC's 23 July 2007 Decision and denying

LSIA's petition for lack of merit. Applying the principle that respondents could not be considered illegally

dismissed before the lapse of six months from their being placed on floating status by LSIA, the CA justified the

awards of separation pay, proportionate 13th month pay and SILP in the following wise:

In another vein, however, . . . respondents were caught off guard when Rogelio Morales, [LSIA's] representative

summarily told them not to report to Union Bank anymore. They did not understand its implications as no one

bothered to explain what would happen to them. At any rate, it is clear as day that . . . respondents no longer

wish to continue their employment with [LSIA] because of the shabby treatment previously given them. Their

relations have obviously turned sour. Such being the case, separation pay, in lieu of reinstatement, is proper.

Separation pay is granted where reinstatement is no longer advisable because of strained relations between the

employer and the employee.

xxx xxx xxx

The burden of proving payment of holiday pay and salary differentials belong to the employer, not the

employee. Here [LSIA] failed to present proofs that . . . respondents received payment for [SILP] and thirteenth

month pay which accrued to them under the law. As the labor arbiter ruled, however, payment of [SILP] shall

only be for the last three (3) years of . . . respondents' service taking into consideration the provisions on

prescription of money claims and proportionate 13th month pay for the year 2004.

Aggrieved by the foregoing decision as well as the CA's 21 January 2009 denial of their motion for

reconsideration thereof, LSIA and Poe filed the Petition for Review on Certiorari at bench, on the following

grounds:

I

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT UPHELD THE NLRC DECISION

AWARDING TO RESPONDENTS SEPARATION PAY DESPITE ITS FINDINGS THAT THEY WERE NOT

ILLEGALLY DISMISSED.

II

THE COURT OF APPEALS ERRED WHEN IT UPHELD THE NLRC DECISION AWARDING TO

RESPONDENTS SERVICE INCENTIVE LEAVE PAY FOR THE YEARS 2003, 2004 AND 2005.

In urging the grant of their petition, LSIA and Poe argue that, upon discounting the factual basis for

respondents' claim that they were illegally dismissed from employment, the CA should have disallowed the

award of separation pay awarded by the Labor Arbiter and the NLRC. They insist that like backwages, separation

pay is the legal consequence of a finding of illegal dismissal and should, perforce, be deleted in the absence

thereof, particularly when no evidence was adduced to prove the strained relations between the employer and

employee. LSIA and Poe also fault the CA for ignoring the Bank Advice Slips and On Demand Statement of

Account belatedly submitted alongside the motion for reconsideration they filed before the NLRC, to prove

payment of respondents' SILP for the years 2004 and 2005. In their comment to the petition, on the other

hand, respondents insist that they have been illegally dismissed from employment and that the Labor Arbiter's

determination to that effect was erroneously reversed by both the NLRC and the CA.

The petition is impressed with merit.

16

Applying Article 286 of the Labor Code of the Philippines by analogy, this Court has repeatedly recognized that

security guards may be temporarily sidelined by their security agency as their assignments primarily depend on

the contracts entered into by the latter with third parties. Temporary "off-detail" or "floating status" is the

period of time when security guards are in between assignments or when they are made to wait after being

relieved from a previous post until they are transferred to a new one. It takes place when, as here, the security

agency's clients decide not to renew their contracts with the agency, resulting in a situation where the available

posts under its existing contracts are less than the number of guards in its roster. For as long as such

temporary inactivity does not continue for a period exceeding six months, it has been ruled that placing an

employee on temporary "off-detail" or "floating status" is not equivalent to dismissal.

In the case at bench, respondents were informed on 29 April 2005 that they were going to be relieved from duty

as a consequence of the 30 April 2005 expiration of the security service contract between Union Bank and LSIA.

While respondents lost no time in immediately filing their complaint on 3 May 2005, the record equally shows

that they were directed by LSIA to report for work at its Mandaluyong City office on 10 May 2005 or a mere ten

days from the time the former were effectively sidelined. Considering that a security guard is only considered

illegally dismissed from service when he is sidelined from duty for a period exceeding six months, we find that

the CA correctly upheld the NLRC's ruling that respondents were not illegally dismissed by LSIA. Parenthetically,

said ruling is binding on respondents who did not appeal either the decision rendered by the NLRC or the CA in

line with the entrenched procedural rule in this jurisdiction that a party who did not appeal cannot assign such

errors as are designed to have the judgment modified.

Having correctly ruled out illegal dismissal of respondents, the CA reversibly erred, however, when it sustained

the NLRC's award of separation pay on the ground that the parties' relationship had already been strained. For

one, liability for the payment of separation pay is a legal consequence of illegal dismissal where reinstatement is

no longer viable or feasible. Under Article 279 of the Labor Code, an illegally dismissed employee is entitled to

the twin reliefs of full backwages and reinstatement without loss of seniority rights. Aside from the instances

provided under Articles 283 and 284 of the Labor Code, separation pay is, however, granted when

reinstatement is no longer feasible because of strained relations between the employer and the employee. In

cases of illegal dismissal, the accepted doctrine is that separation pay is available in lieu of reinstatement when

the latter recourse is no longer practical or in the best interest of the parties.

As a relief granted in lieu of reinstatement, however, it consequently goes without saying that an award of

separation pay is inconsistent with a finding that there was no illegal dismissal. Standing alone, the doctrine of

strained relations will not justify an award of separation pay, a relief granted in instances where the common

denominator is the fact that the employee was dismissed by the employer. Even in cases of illegal dismissal, the

doctrine of strained relations is not applied indiscriminately as to bar reinstatement, especially when the

employee has not indicated an aversion to returning to work or does not occupy a position of trust and

confidence in or has no say in the operation of the employer's business. Although litigation may also engender

a certain degree of hostility, it has likewise been ruled that the understandable strain in the parties' relations

would not necessarily rule out reinstatement which would, otherwise, become the rule rather than the exception

in illegal dismissal cases.

Our perusal of the position paper they filed a quo shows that, despite erroneously believing themselves to have

been illegally dismissed, respondents had alleged no circumstance indicating the strained relations between

them and LSIA and had even alternatively prayed for reinstatement alongside the payment of separation

pay. Since application of the doctrine of strained relations presupposes a question of fact which must be

demonstrated and adequately supported by evidence, the CA clearly erred in ruling that the parties' relations

had already soured and that an award of separation pay in favor of respondents is proper. Apprised by Union

Bank on 1 April 2005 that it was no longer renewing its security service contract after 30 April 2005, LSIA may

have tarried in informing respondents of the fact only on 29 April 2005. As correctly ruled by the NLRC, however,

the resultant inconvenience to respondents cannot detract from the fact that the employer-employee relationship

between the parties still subsisted and had yet to be severed when respondents filed their complaint on 3 May

2005.

17

Absent illegal dismissal on the part of LSIA and abandonment of employment on the part of respondents, we

find that the latter's reinstatement without backwages is, instead, in order. In addition to respondent's

alternative prayer therefor in their position paper, reinstatement is justified by LSIA's directive for them to report

for work at its Mandaluyong City office as early of 10 May 2005. As for the error ascribed the CA for failing to

correct the NLRC's disregard of the evidence showing LSIA's payment of respondents' SILP, suffice it to say that

the NLRC is not precluded from receiving evidence, even for the first time on appeal, because technical rules of

procedure are not binding in labor cases. Considering that labor officials are, in fact, encouraged to use all

reasonable means to ascertain the facts speedily and objectively, with little resort to technicalities of law or

procedure, LSIA correctly faults the CA for likewise brushing aside the evidence of SILP payments it submitted

during the appeal stage before the NLRC.

The record shows that respondents were uniformly awarded SILP at the rate of P666.00 for the period May 3 to

December 31, 2002, P1,000.00 for the period January 1 to December 31, 2003, P1,040.00 for the period January

1 to December 31, 2004 and P347.36 for the period January 1 to May 3, 2005 or a total of P3,053.36 each. The

Bank Advice Slips and On Demand Statement of Account submitted by LSIA before the NLRC shows uniform

payments of SILP to respondents in the sum of P1,025 for the year 2004 which should, therefore, be deducted

from the award of said benefit in favor of respondent. Although LSIA also submitted a Bank Advice Slip showing

a supposed P1,065.00 payment of SILP for the year 2005 in favor of respondent Sabang only, the absence of an

On Demand Statement of Account for said amount impels Us to disallow the further deduction thereof from the

SILP award.

WHEREFORE, premises considered, the petition is GRANTED and the assailed Decision dated 26 September

2008 is, accordingly, MODIFIED to direct the reinstatement of respondents in lieu of the award of separation

pay and to deduct the sum of P1,025.00 from the SILP individually awarded in favor of respondents. The rest

isAFFIRMED.

SO ORDERED.

||| (Leopard Security and Investigation Agency v. Quitoy, G.R. No. 186344, [February 20, 2013])

Contempt powers of the NLRC

[G.R. No. 176085. February 8, 2012.]

FEDERICO S. ROBOSA, ROLANDO E. PANDY, NOEL D. ROXAS, ALEXANDER ANGELES, VERONICA

GUTIERREZ, FERNANDO EMBAT, and NANETTE H. PINTO, petitioners, vs. NATIONAL LABOR

RELATIONS COMMISSION (First Division), CHEMO-TECHNISCHE MANUFACTURING, INC. and its

responsible officials led by FRANKLIN R. DE LUZURIAGA, and PROCTER & GAMBLE PHILIPPINES,

INC., respondents.

DECISION

BRION, J p:

We resolve the petition for review on Certiorari seeking the reversal of the resolutions of the Court of

Appeals (CA) rendered on February 24, 2006 and December 14, 2006 in CA-G.R. SP No. 80436.

Factual Background

Federico S. Robosa, Rolando E. Pandy, Noel D. Roxas, Alexander Angeles, Veronica Gutierrez, Fernando Embat

and Nanette H. Pinto (petitioners) were rank-and-file employees of respondent Chemo-Technische

Manufacturing, Inc. (CTMI), the manufacturer and distributor of "Wella" products. They were officers and

members of the CTMI Employees Union-DFA (union). Respondent Procter and Gamble Philippines, Inc. (P &

GPI) acquired all the interests, franchises and goodwill of CTMI during the pendency of the dispute.

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Sometime in the first semester of 1991, the union filed a petition for certification election at CTMI. On June 10,

1991, Med-Arbiter Rasidali Abdullah of the Office of the Department of Labor and Employment in the National

Capital Region (DOLE-NCR) granted the petition. The DOLE-NCR conducted a consent election on July 5, 1991,

but the union failed to garner the votes required to be certified as the exclusive bargaining agent of the

company.

On July 15, 1991, CTMI, through its President and General Manager Franklin R. de Luzuriaga, issued a

memorandum announcing that effective that day: (1) all sales territories were demobilized; (2) all vehicles

assigned to sales representatives should be returned to the company and would be sold; (3) sales

representatives would continue to service their customers through public transportation and would be given

transportation allowance; (4) deliveries of customers' orders would be undertaken by the warehouses; and (5)

revolving funds for ex-truck selling held by sales representatives should be surrendered to the cashier (for Metro

Manila) or to the supervisor (for Visayas and Mindanao), and truck stocks should immediately be surrendered to

the warehouse.

On the same day, CTMI issued another memorandum informing the company's sales representatives and sales

drivers of the new system in the Salon Business Group's selling operations.

The union asked for the withdrawal and deferment of CTMI's directives, branding them as union busting acts

constituting unfair labor practice. CTMI ignored the request. Instead, it issued on July 23, 1991 a notice of

termination of employment to the sales drivers, due to the abolition of the sales driver positions.

On August 1, 1991, the union and its affected members filed a complaint for illegal dismissal and unfair labor

practice, with a claim for damages, against CTMI, De Luzuriaga and other CTMI officers. The union also moved

for the issuance of a writ of preliminary injunction and/or temporary restraining order (TRO).

The Compulsory Arbitration Proceedings

The labor arbiter handling the case denied the union's motion for a stay order on the ground that the issues

raised by the petitioners can best be ventilated during the trial on the merits of the case. This prompted the

union to file on August 16, 1991 with the National Labor Relations Commission (NLRC), a petition for the

issuance of a preliminary mandatory injunction and/or TRO.

On August 23, 1991, the NLRC issued a TRO. It directed CTMI, De Luzuriaga and other company executives to

(1) cease and desist from dismissing any member of the union and from implementing the July 23, 1991

memorandum terminating the services of the sales drivers, and to immediately reinstate them if the dismissals

have been effected; (2) cease and desist from implementing the July 15, 1991 memorandum grounding the

sales personnel; and (3) restore the status quo ante prior to the formation of the union and the conduct of the

consent election.

Allegedly, the respondents did not comply with the NLRC's August 23, 1991 resolution. They instead moved to

dissolve the TRO and opposed the union's petition for preliminary injunction.

On September 12, 1991, the NLRC upgraded the TRO to a writ of preliminary injunction. The respondents

moved for reconsideration. The union opposed the motion and urgently moved to cite the responsible CTMI

officers in contempt of court.

On August 25, 1993, the NLRC denied the respondents' motion for reconsideration and directed Labor Arbiter

Cristeta Tamayo to hear the motion for contempt. In reaction, the respondents questioned the NLRC orders

before this Court through a petition for certiorari and prohibition with preliminary injunction. The Court dismissed

the petition for being premature. It also denied the respondents' motion for reconsideration, as well as a second

motion for reconsideration, with finality. This notwithstanding, the respondents allegedly refused to obey the

NLRC directives. The respondents' defiance, according to the petitioners, resulted in the loss of their

employment.

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Meanwhile, the NLRC heard the contempt charge. On October 31, 2000, it issued a resolution dismissing the

charge. It ordered the labor arbiter to proceed hearing the main case on the merits.

The petitioners moved for, but failed to secure, a reconsideration from the NLRC on the dismissal of the

contempt charge. They then sought relief from the CA by way of a petition for certiorari under Rule 65.

The CA Decision

The CA saw no need to dwell on the issues raised by the petitioners as the question it deemed appropriate for

resolution is whether the NLRC's dismissal of the contempt charge against the respondents may be the proper

subject of an appeal. It opined that the dismissal is not subject to review by an appellate court. Accordingly, the

CA Special Sixth Division dismissed the petition in its resolution of February 24, 2006.

The CA considered the prayer of P & GPI to be dropped as party-respondent moot and academic.

The petitioners sought a reconsideration, but the CA denied the motion in its resolution of December 14,

2006. Hence, the present Rule 45 petition.

The Petition

The petitioners charge the CA with grave abuse of discretion in upholding the NLRC resolutions, despite the

reversible errors the labor tribunal committed in dismissing the contempt charge against the respondents. They

contend that the respondents were guilty of contempt for their failure (1) to observe strictly the NLRC status

quoorder; and (2) to reinstate the dismissed petitioners and to pay them their lost wages, sales

commissions, per diems, allowances and other employee benefits. They also claim that the NLRC, in effect,

overturned this Court's affirmation of the TRO and of the preliminary injunction.

The petitioners assail the CA's reliance on the Court's ruling that a contempt charge partakes of a criminal

proceeding where an acquittal is not subject to appeal. They argue that the facts obtaining in the present case

are different from the facts of the cases where the Court's ruling was made. They further argue that by the

nature of this case, the Labor Code and its implementing rules and regulations should apply, but in any event,

the appellate court is not prevented from reviewing the factual basis of the acquittal of the respondents from the

contempt charges.

The petitioners lament that the NLRC, in issuing the challenged resolutions, had unconstitutionally applied the

law. They maintain that not only did the NLRC unconscionably delay the disposition of the case for more than

twelve (12) years; it also rendered an unjust, unkind and dubious judgment. They bewail that "[f]or some

strange reason, the respondent NLRC made a queer [somersault] from its earlier rulings which favor the

petitioners."

The Case for the Respondents

Franklin K. De Luzuriaga

De Luzuriaga filed a Comment on May 17, 2007 and a Memorandum on December 4, 2008, praying for a

dismissal of the petition.

De Luzuriaga argues that the CA committed no error when it dismissed the petition for certiorari since the

dismissal of the contempt charge against the respondents amounted to an acquittal where review by an

appellate court will not lie. In any event, he submits, the respondents were charged with indirect contempt

which may be initiated only in the appropriate regional trial court, pursuant to Section 12, Rule 71 of the Rules

of Court. He posits that the NLRC has no jurisdiction over an indirect contempt charge. He thus argues that the

petitioners improperly brought the contempt charge before the NLRC.

Additionally, De Luzuriaga points out that the petition raises only questions of facts which, procedurally, is not

allowed in a petition for review on certiorari. Be this as it may, he submits that pursuant to Philippine Long

Distance Telephone Company, Inc. v. Tiamson, factual findings of labor officials, who are deemed to have

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acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but

even finality. He stresses that the CA committed no reversible error in not reviewing the NLRC's factual findings.

Further, De Luzuriaga contends that the petitioners' verification and certification against forum shopping is

defective because it was only Robosa and Pandy who executed the document. There was no indication that they

were authorized by Roxas, Angeles, Gutierrez, Embat and Pinto to execute the required verification and

certification.

Lastly, De Luzuriaga maintains that the petitioners are guilty of forum shopping as the reliefs prayed for in the

petition before the CA, as well as in the present petition, are the same reliefs that the petitioners may be entitled

to in the complaint before the labor arbiter.

P & GPI

As it did with the CA when it was asked to comment on the petitioners' motion for reconsideration, P & GPI

prays in its Comment and Memorandum that it be dropped as a party-respondent, and that it be excused from

further participating in the proceedings. It argues that inasmuch as the NLRC resolved the contempt charge on

the merits, an appeal from its dismissal through a petition for certiorari is barred. Especially in its case, the

dismissal of the petition for certiorari is correct because it was never made a party to the contempt proceedings

and, thus, it was never afforded the opportunity to be heard. It adds that it is an entity separate from CTMI. It

submits that it cannot be made to assume any or all of CTMI's liabilities, absent an agreement to that effect but

even if it may be liable, the present proceedings are not the proper venue to determine its liability, if any.

On December 16, 2008, the petitioners filed a Memorandum raising essentially the same issues and arguments

laid down in the petition.

The Court's Ruling

Issues

The parties' submissions raise the following issues:

(1)whether the NLRC has contempt powers;

(2)whether the dismissal of a contempt charge is appealable; and

(3)whether the NLRC committed grave abuse of discretion in dismissing the contempt charge against the

respondents.

On the first issue, we stress that under Article 218 of the Labor Code, the NLRC (and the labor arbiters) may

hold any offending party in contempt, directly or indirectly, and impose appropriate penalties in accordance with

law. The penalty for direct contempt consists of either imprisonment or fine, the degree or amount depends on

whether the contempt is against the Commission or the labor arbiter. The Labor Code, however, requires the

labor arbiter or the Commission to deal with indirect contempt in the manner prescribed under Rule 71 of the

Rules of Court.

Rule 71 of the Rules of Court does not require the labor arbiter or the NLRC to initiate indirect contempt

proceedings before the trial court. This mode is to be observed only when there is no law granting them

contempt powers. As is clear under Article 218 (d) of the Labor Code, the labor arbiter or the Commission is

empowered or has jurisdiction to hold the offending party or parties in direct or indirect contempt. The

petitioners, therefore, have not improperly brought the indirect contempt charges against the respondents

before the NLRC.

The second issue pertains to the nature of contempt proceedings, especially with respect to the remedy available

to the party adjudged to have committed indirect contempt or has been absolved of indirect contempt charges.

In this regard, Section 11, Rule 71 of the Rules of Court states that the judgment or final order of a court in a

case of indirect contempt may be appealed to the proper court as in a criminal case. This is not the point at

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issue, however, in this petition. It is rather the question of whether the dismissal of a contempt charge, as in the

present case, is appealable. The CA held that the NLRC's dismissal of the contempt charges against the

respondents amounts to an acquittal in a criminal case and is not subject to appeal.

The CA ruling is grounded on prevailing jurisprudence.

In Yasay, Jr. v. Recto, the Court declared:

A distinction is made between a civil and [a] criminal contempt. Civil contempt is the failure to do something

ordered by a court to be done for the benefit of a party. A criminal contempt is any conduct directed against the

authority or dignity of the court.

The Court further explained in Remman Enterprises, Inc. v. Court of Appeals and People v. Godoy the character

of contempt proceedings, thus

The real character